TaxTMI 
TaxTMI 
2024 (10) TMI 870
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....er proceedings pursuant to the impugned notice. However, on 10.12.2019, the AO dispatched the assessment order dated 05.12.2019 (hereafter the impugned re-assessment order), for the assessment year 2012-13, passed under Section 143 (3)/147 of the Act. The impugned re-assessment order was received by the petitioner on 11.12.2019. Thereafter, the petitioner had filed an application (CM No.55629/2019) assailing the impugned re-assessment order for the assessment year 2012-13 and this court stayed the same. PREFATORY FACTS 3. M/s Alankar Promoters Pvt. Ltd. (hereafter referred to as APPL and/or the assessee) was incorporated on 07.09.2011 under the Companies Act, 1956. During the financial year 2011-12, the assessee had availed interest free unsecured loan of Rs. 5,00,000/- from Sh. Ashok Kumar Jain, who was at the material time, a Director of the assessee. 4. The assessee claims that the aforesaid loan of a sum of Rs. 5,00,000/- was for business purposes and was received through proper banking channels. The loan was repaid to Sh Ashok Kumar Jain during the financial year 2012-13, through banking channels. 5. On 24.08.2012, the assessee filed its return of income under Section 139 ....
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....he submissions made by the petitioner in his representation dated 27.11.2019 that the loan of Rs. 5 lakhs advanced by the Director of the Assessee Company to the assessee petitioner was repaid in the immediately following year i.e. Assessment Year 2013-14 through proper banking channels has been dealt with at the time of passing of the order - rejecting the representation on 02.12.2019. Rejoinder, if any, be filed before the next date. List on 20.07.2020. In the meantime, the proceedings in pursuance of notice under Section 148, shall remain stayed." 13. It transpires that pursuant to the impugned notice, the AO had passed the impugned re-assessment order. However, this fact was not brought to the notice of this Court on 09.12.2019, even though the respondents were represented by the counsel on advance notice. 14. The impugned re-assessment order was dispatched on 10.12.2019 and was received by the petitioner on 11.12.2019. 15. As noted above, the petitioner filed an application (being CM No.55629/2019) seeking setting aside of the impugned re-assessment order. And, by an ad interim order dated 24.12.2019, this Court stayed the operation of the impugned re-assessment order. 1....
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....ed also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment." 21. It would be material to consider the jurisprudence regarding the threshold conditions to be satisfied for re-opening of an assessment under Section 147/148 of the Act. 22. In Chhugamal Rajpal v. S.P. Chaliha & Others: (1971) 79 ITR 603, the assessing officer sought to reopen the assessment on the basis of a communication received from the Commissioner of Income Tax to the effect that the creditors of the assesssee were "name lenders and the transactions are bogus". The Supreme Court considered the question whether the same would constitute reasons to believe that the income of the assessee had escaped assessment and accepted the assessee's contention that the assessing officer did not have any such reasons. The Supreme Court observed that the assessing officer "had not even come to a prima facie conclusion that the transactions to which he referred were not genuine transactions. He appears to have had only a vague feeling that there may be bogus....
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....l evidence or conclusion. The function of the assessing officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. 17. As observed by the Delhi High Court (sic the Supreme Court) in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991] 191 ITR 662, for initiation of action under section 147 (a) (as the provision stood at the relevant time) fulfilment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is "reason to believe", but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the assessing officer is within the realm of subjective satisfaction (see ITO v. Selected Dalurband Coal Co. P. Ltd. [1996] 217 ITR 597 (SC) ; Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC)." 26. Thus, a....
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....cessary for his assessment. Thus, in order to reopen an assessment which is beyond the period of four years from the end of the relevant assessment year, the condition that there has been a failure on the part of the Assessee to truly and fully disclose all material facts must be concluded with certain level of certainty. It is in the aforesaid context that this Court in M/s Haryana Acrylic Manufacturing Co. (P) Ltd. 308 ITR 38 (Del) explained that the ratio of the decision in Phool Chand Bajrang Lal (supra) may not be entirely applicable since the same was in respect of Section 147 (a) as it existed prior to the amendment." 29. At this stage, it would also be relevant to refer to the following observations of the Supreme Court in Income Tax Officer, I Ward District VI, Calcutta and Ors. v. Lakhmani Mewal Das: (1976) 3 SCC 757: "11. As stated earlier, the reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income Tax Officer and the formation of his belief that there has been es....
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....vent, the link was too tenuous to provide a legally sound basis for reopening the assessment. The majority of the learned Judges in the High Court, in our opinion, were not in error in holding that the said material could not have led to the formation of the belief that the income of the assessee respondent had escaped assessment because of his failure or omission to disclose fully and truly all material facts. We would, therefore, uphold the view of the majority and dismiss the appeal with costs." 30. In the present case, the assessee had filed its return of income showing Nil return. The petitioner had also annexed his balance sheet showing unsecured loan of Rs. 5,00,000/-. The AO had initiated the re- assessment proceedings solely on the basis that the petitioner's balance sheet recorded an outstanding unsecured loan of Rs. 5,00,000/-. This is apparent from a plain reading of the reasons for reopening of the assessment as recorded by the AO. The relevant extract of the said reasons is set out below: "In this case Company was incorporated 09.07.2011 and has authorized capital Rs. 1,00,000/-. It has not shown any sales/receipts or any other Income. But on perusal of Balance she....